The road ahead for transport fuels and fleets – driving New Zealand's economic growth
Good morning everyone, and thanks for the opportunity to present to you today. I’d like to start by talking a little about the role Government plays in ensuring the safe, efficient and reliable supply of transport fuels, minimising barriers to competition, and promoting a competitive market.
Of course, environmental outcomes are also very important.
Transport fuel is fundamental to New Zealand’s economy, underpinning the movement of New Zealanders and the competiveness of our businesses. In 2014, 44 per cent of total consumer energy demand was from oil and 81 per cent of this demand was consumed in domestic transport.
We want to ensure; incentives for investment, that fuel costs are subject to sustained downward pressure, that risks relating to security of supply are properly and efficiently managed, and that the highest possible health and safety regimes are upheld.
At the same time, New Zealand has a market-led approach to transport fuels that aims to deliver the lowest cost to consumers. This core policy has existed since the industry was deregulated in 1988 and I believe it has served New Zealand well.
However, it is important that New Zealanders are confident in our approach. Transparency is key. That’s why the Government carries out weekly monitoring of importer margins for regular petrol and automotive diesel, and recently revised its methodology to reflect discounting activity.
Where the Government can add real value is in helping ensure that New Zealand is an earlier adopter of new, innovative technologies – in particular those that improve competition and lead to better environmental outcomes.
Government-imposed standards for fuel quality and vehicle emissions have long been important to the introduction of newer, more efficient vehicle technology.
The progressive reduction in sulphur levels in petrol and diesel over the last 13 years, alongside increasingly stringent vehicle emissions standards, is allowing the newest and cleanest vehicle technologies to be adopted here.
One of those technologies – near and dear to my heart – is Electric vehicles. As many of you know, I’m a great fan of EVs.
For me, the cross-portfolio appeal as Energy, Transport and Associate Climate Change Minister is obvious. EVs offer multiple benefits, including reduced emissions and increased use of locally produced renewable energy.
Driving an EV in New Zealand generates 80 per cent fewer CO2 emissions than petrol and diesel vehicles. As the renewable proportion of New Zealand’s electricity continues to grow, the CO2 emissions from an EV will reduce further.
Reducing transport emissions requires a range of measures, of which increasing the use of electric vehicles is just one. Support for the likes of public transport, walking and cycling, vehicle and ride sharing is also important.
But because of our high percentage of renewable energy, the energy benefits of electric vehicles in New Zealand are greater than in other countries.
Currently, around 80 per cent of our electricity is generated from renewable sources. Even if all the vehicles on our roads were electric, we have consents for enough renewable generation to cover this demand.
The Government is currently considering what role we could play in facilitating the uptake of EVs. We are specifically looking at ways to ensure that charging infrastructure is developed in a safe and cohesive way. We have already extended the Road User Charge exemption that applies to EVs to June 2020.
We are also examining what the Government could or should do to address the lack of awareness and misconceptions about EVs and uncertainty about matters such as the total cost of ownership.
EECA’s total cost of ownership toolkit
On that note, I am happy to announce that today EECA is launching a new online tool to help fleet managers understand the total cost of ownership of new light fleet vehicles – whether EV, hybrid, petrol or diesel. Whether or not a fleet manager opts for EVs, this will be a valuable tool for assessing the total cost of fleet vehicles, including running costs.
EECA is targeting fleet managers to encourage them to purchase EVs, as around 70 percent of new car purchases in New Zealand are made by businesses for corporate fleets. This means purchase decisions made by fleet managers have a huge impact on the nature of New Zealand’s overall vehicle fleet. Simply put, the more EVs that are passed on from corporate fleets to the second hand market, the more Kiwis will be able to buy them.
Market research by EECA and the Ministry of Transport shows 47 percent of fleet managers say they don’t know how to compare the running costs of EVs with conventional vehicles — so this tool should prove invaluable.
As well as that, my officials are working with local government and key business leaders to develop a package of measures to support and encourage the uptake of electric vehicles. We hope to announce this package by the end of the year.
While we all look forward to the global transition to a low carbon future that EVs will undoubtedly be a part of, oil will in the meantime undeniably meet the vast majority of our transport needs.
Without doubt, transport energy is diversifying and will increasingly do so. Biofuels are providing new opportunities for how we power our fleets. The benefits of biofuels are well known, including reduced net carbon dioxide emissions, reduced emissions that affect air quality and human health, and better fuel lubrication and reduced deposits in diesel engines.
The Government wants to help with the uptake of biofuels wherever this is possible and commercially viable. Two examples are the proposals in the current review of fuel specifications to lift the biodiesel blend limit in diesel from five to seven per cent, which is the limit in Europe, and to introduce a new standard for E85, that is a fuel which consists of 85 per cent ethanol and 15 per cent mineral petrol.
Fleet trends and the impact of technology
While we want to benefit from innovation in our transport fuel mix, we also need to be open to innovation in how New Zealanders move around.
We know that New Zealanders are high users of private vehicles. We drive nearly 30 billion kilometres each year and the road network also carries 70 per cent of all of our freight.
From 1980 to 2004, there was a 3 percent increase in demand per year. Over the last decade, travel per capita has flattened. Though the total distance travelled continues to increase slowly, we can’t be certain demand will return to pre-2005 levels of growth, but nor can we be sure it will remain flat.
As well as this uncertainty about how much people will travel over coming years, we’re seeing interesting changes in how people choose to undertake those journeys.
Mobile technology like ride sharing apps mean the taxi industry is facing stiffer competition from emerging private hire services.
Vehicle sharing is not new, but is now flourishing because of new technology. Companies such as Zipcar and Car2Go establishing hundreds of thousands of users across Europe and North America. The mobile apps GrabTaxi, GrabCar and GrabBike are providing more transport options for consumers in six countries across South East Asia.
I believe we can expect to see these services grow in New Zealand as well in the next few years. And the Government is keen to support this.
This is why I asked transport officials to review the small passenger services industry earlier this year. The review is considering the appropriate level of regulation for taxis, shuttles, private hire and dial-a-driver services, and other services such as ride sharing and car sharing.
We want to ensure New Zealand’s regulatory environment is both fit for purpose and flexible enough to accommodate new technologies.
Smartphone apps are just one example of intelligent transport system technologies, which are revolutionising the transport system globally. These technologies offer some of the best prospects for reducing carbon emissions, improving safety and increasing efficiency.
Imagine a world where connected and driverless vehicles are widely used on our roads. If that was to happen, three to four times as many vehicles could use our current road space. That would lead to less of a need for new roads, and – depending on the vehicles – can also have a significant impact on fuel use.
I want New Zealanders to be able to capitalise on these and other transport technologies, and the Government has an important role in helping to realise their full benefit.
Trucks and heavy commercial vehicles use about a third of transport energy.
Greenhouse gas emissions – or GHGs - from road transport are 69 per cent higher now than in 1990. From the Government’s perspective, the heavy transport sector has the ability to make a big impact on reducing New Zealand’s GHG emissions.
EECA’s Heavy Vehicle Fuel Efficiency Programme, which started in 2012, helps heavy vehicle fleets to save fuel, reduce CO2 emissions and also leads to greater road safety and reduced maintenance costs. The focus is on working alongside fleet managers to put fuel management action plans in place. At the end of 2014/15, heavy vehicle fleets consuming a total of 7 per cent of heavy vehicle diesel use are implementing a fuel saving programme.
As just one example of the success of the programme, TIL Freight Group has seen early fuel savings of seven per cent – with better environmental management becoming increasingly important to their customers.
The new and emerging trends in transport fuels and fleets I’ve outlined today are undoubtedly presenting new opportunities for New Zealand. While the Government has a clear role to play in areas such as price monitoring, it fully supports and is encouraged by innovation led by the sector itself – these are bringing tangible benefits to consumers and the environment, and are driving efficiencies into the economy.
Thanks for your time and enjoy the rest of the summit.